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					                     IN THE UNITED STATES BANKRUPTCY COURT
                     FOR THE NORTHERN DISTRICT OF ALABAMA
                                SOUTHERN DIVISION



 IN RE:                                               )
                                                      )   Chapter 11
                                                  1
 ADAMS PRODUCE COMPANY, LLC, et al.,                  )
                                                      )   Case No. 12-02036-TOM-11
                       Debtors.                       )   (Joint Administration Pending)


     DEBTORS' MOTION PURSUANT TO 11 U.S.C. §§ 105(a), 363(b) AND (c) AND
      507(a)(8), FOR AUTHORIZATION TO PAY PRE-PETITION SALES TAXES,
    PROPERTY TAXES, PERSONAL PROPERTY TAXES AND BUSINESS LICENSE
                                  TAXES


        COME NOW, Adams Produce Company, LLC ("Adams Produce") and Adams Clinton

 Business Park, LLC ("Adams Clinton") as debtors and debtors in possession (collectively, the

 "Debtors") and, pursuant to §§ 105(a), 363(b) and (c) and 507(a)(8) of Title 11 of the United

 States Code, 11 U.S.C. §§ 101 et seq. (the "Bankruptcy Code"), move this Court (this "Motion")

 to enter an order authorizing the Debtors to pay certain pre-petition sales taxes, property taxes,

 personal property taxes, and business taxes. In support of this Motion, the Debtors rely on the

 Affidavit of Thomas S. O'Donoghue, Jr. in Support of Chapter 11 Petitions and First Day

 Motions, filed contemporaneously herewith, and states as follows:

                                  JURISDICTION AND VENUE

        1.      On April 27, 2012 (the "Petition Date"), the Debtors filed voluntary petitions for

 relief under chapter 11 of the Bankruptcy Code with the Clerk of this Court. The Debtors



        1
          The Debtors in these chapter 11 cases are Adams Produce Company, LLC and Adams
 Clinton Business Park, LLC. The location of the Debtors' corporate headquarters is 300 Union
 Hill Drive, Suite 300, Birmingham, Alabama 35209.




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 continue to operate their businesses and manage their properties as debtors in possession

 pursuant to §§ 1107(a) and 1108.

              2.   This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and

 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b). Venue of the Debtors' chapter

 11 cases and this Motion in this district is proper pursuant to 28 U.S.C. §§ 1408 and 1409. The

 statutory predicates for the relief requested herein are Bankruptcy Code §§ 105(a), 363(b) and (c)

 and 507(a)(8).

                                    FACTUAL BACKGROUND

 Company Background

              3.   Adams Produce is a privately held company headquartered in Birmingham,

 Alabama, and is a leading distributor of fresh fruits and vegetables to restaurants, government

 and hospitality establishments across the Southeastern United States.2 Adams Produce has

 multiple distribution centers located throughout the Southeast, servicing the states of Alabama,

 Arkansas, Florida, Georgia, Mississippi, and Tennessee. Adams Produce employs over 400

 employees.

              4.   Edwin Calvin Adams founded Adams Produce in 1903 when he incorporated E.C.

 Adams & Co. Adams Produce's business grew, and once members of the Adams family joined

 the company, Adams Produce was renamed Adams Brothers Produce Co., Inc. in 1936. Today,

 Adams Produce is the preeminent "produce specialist" in the Southeastern United States.

 Debt Structure

              5.   The Debtors have several loans with PNC Bank, National Association ("PNC"),

 including (i) a real estate term loan made to the Debtors (the "Real Estate Loan"); (ii) a term loan

              2
          Adams Clinton is an affiliate of Adams Produce and owns real property in the State of
 Mississippi.

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 (the "Term Loan") made to the Debtors; and (iii) and a revolving line of credit extended to the

 Debtors (the "Revolver").       The current amount outstanding under the Real Estate Loan is

 approximately $1.35 million.         The current amount outstanding under the Term Loan is

 $750,000.00. The current amount outstanding under the Revolver is approximately $3.4 million.

 The Debtors' obligations to PNC are secured by the majority of the Debtors' assets. Adams

 Produce is also indebted on promissory notes executed by Adams Produce in favor of (i) CIC

 API LP in the amount of $1 million, (ii) Carl Adams III in the amount of $500,000.00, and (iii)

 John McCray in the amount of $500,000.00. Adams Produce owes approximately $4.4 million

 in accounts payable to trade and other creditors, and approximately $10.2 million to agricultural

 commodity suppliers.

 Events Leading to Bankruptcy

              6.   For the last several years, Adams Produce has suffered market pressures that have

 affected all of their products. The already thin margins on which Adams Produce operated in

 2010 have continued to decline, resulting in lowered EBITDA and operating income. As income

 has decreased, Adams Produce has fallen behind on payments to its vendors.

              7.   Adams Produce has worked to restructure its obligations, but the timeframe for

 Adams Produce's restructuring options has proven unworkable because Adams Produce does not

 have enough cash to implement any viable restructuring options. The timeframe has proven

 unworkable because many seasonal competitors, like farmer's markets, operate during the

 summer, and many of the Debtors' customers, such as schools, purchase produce from Adams

 Produce only during the non-summer months. For these reasons, the summer is the slowest

 season for Adams Produce's business, and Adams Produce's situation has become particularly

 distressed as the summer approaches.



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 The Debtors' Pre-Petition Taxes

              8.    In the normal course of the Debtors' business operations, the Debtors are

 obligated to remit certain sales taxes, property taxes, personal property taxes, and business

 license taxes (the "Taxes"), to state, county and/or municipal taxing authorities (collectively, the

 "Taxing Authorities").        These Taxes are levied for the privilege of operating a business,

 conducting a particular activity, or maintaining a physical structure within a particular Taxing

 Authority's jurisdiction. The timing and process by which the Debtors remit these Taxes varies,

 depending on the exact nature of the Tax and the identity of the Taxing Authority. A list of

 certain of the Taxing Authorities is attached hereto as Exhibit "A."

              9.    As of the Petition Date, the Debtors have initiated payment(s) for approximately

 $21,000.00 worth of unpaid, pre-petition Taxes through the issuance of certain checks (the

 "Payments in Transit"). As of the Petition Date, the Payments in Transit are in route to the

 appropriate Taxing Authority.

                                         RELIEF REQUESTED

              10.   By this Motion, the Debtors seek authorization for the applicable banks and

 financial institutions to process, honor, and pay any and all checks, drafts and pre-petition wire

 transfer requests relating to the Payments in Transit, and to rely on the representations of the

 Debtors as to which checks, drafts or wire transfer requests are issued and authorized to be paid

 in accordance with this Motion without any duty of further inquiry and without liability to any

 party for following the Debtors' instructions.

              11.   The Debtors further request that nothing herein shall preclude the Debtors from

 contesting, in its sole discretion, the validity and amount of any claim for payment of the Taxes.

              12.   The Debtors estimate that while the outstanding pre-petition liability for all pre-

 petition taxes owing may be more than the amount of the Payments in Transit, the Debtors only

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 seek authorization for payment for the Payments in Transit, and in no event more than

 $21,000.00 in the aggregate.        The Debtors will seek further approval from this Court if

 circumstances arise that would require the Debtors to exceed that amount.

              13.   Notwithstanding anything to the contrary contained herein, the relief requested

 herein is sought solely to the extent that it is consistent with the motion (i) authorizing the

 Debtors to (a) obtain post-petition financing on an interim basis and (b) utilize cash collateral of

 pre-petition secured parties on an interim basis, (ii) modifying the automatic stay, and (iii)

 granting related relief (the "Financing Motion"), and to the extent payments requested by this

 Motion are consistent with the approved Budget (as defined in the Financing Motion).

                                    APPLICABLE AUTHORITY

              14.   The relief requested herein relating to the payment of such Taxes to the Taxing

 Authorities should be authorized. The Debtors submit that the Taxes would be entitled to

 priority status under Bankruptcy Code, whether as claims secured by liens on the Debtors'

 property arising under laws of state or jurisdiction in which the claim arises, or under § 507(a)(8)

 of the Bankruptcy Code. To the extent of their priority status, these claims must be paid in full

 under any chapter 11 plan.         Accordingly, to the extent that the Debtors are successful in

 confirming a chapter 11 plan, the proposed relief will only affect the timing of the payment of

 these pre-petition Taxes and will not prejudice the rights of any other creditors or parties in

 interest.

              15.   Moreover, the Debtors seek relief to conduct activities squarely within their

 normal scope of business operations, and debtors-in-possession need not specifically seek

 authorization to conduct activities or use funds constituting property of their estate with respect

 to ordinary course transactions. See, e.g. 11 U.S.C. § 363(c)(1); compare § 363(b)(1) (providing

 that a debtor-in-possession need only seek notice and hearing to conduct activities or use
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 property of the estate outside the ordinary course of debtor's business). In the event this Court

 deems the requested relief to be outside the ordinary course of the Debtors' business, this Court

 nevertheless is empowered to authorize the Debtors to expend these funds outside of the ordinary

 course of debtor's business pursuant to Bankruptcy Code § 363(b). See In re Ionosphere Clubs,

 Inc., 98 B.R. 174, 175 (Bankr. S.D. N.Y. 1989) ("Section 363(b) gives the court broad flexibility

 in tailoring its orders to meet a wide variety of circumstances"); see also In re Montgomery Ward

 Holding Corp., 242 B.R. 147, 155 (D. Del. 1999) ("Section 363(b) should be interpreted liberally

 to provide a bankruptcy judge with 'substantial freedom to tailor his orders to meet differing

 circumstances' and to avoid 'shackling the judge with unnecessarily rigid rules'") (internal

 citation omitted).

              16.   Although Bankruptcy Code § 363(b) does not set forth a standard for determining

 when it is appropriate to authorize transactions outside of the ordinary course, courts generally

 grant such relief if the Debtors articulate a sound business purpose. See Fulton State Bank v.

 Schipper (In re Schipper), 933 F.2d 513, 515 (7th Cir. 1991); In re Aerovox, Inc., 269 B.R. 74,

 80 (Bankr. D. Mass. 2001). The "debtor's business decision should be approved by the court

 unless it is shown to be so manifestly unreasonable that it could not be based upon sound

 business judgment, but only on bad faith, or whim or caprice." In re Aerovox, Inc., 269 B.R. at

 80 (internal citation omitted). As set forth below, the Debtors have sound business justifications

 for granting the relief requested herein.

              17.   Payment of the Taxes will avoid potential administrative difficulties and the

 interruption of the Debtors' business activities. If the Debtors do not pay such amounts, the

 Taxing Authorities may attempt to suspend the Debtors' business operations, file liens, seek to

 lift the automatic stay, and pursue other remedies that will cause harm to the estates.



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 Furthermore, the Debtors believe that it is likely that some, if not all, of such Taxing Authorities

 will cause the Debtors to be audited if the Taxes are not paid.            Such audits also would

 unnecessarily divert the attention away from the reorganization process. Therefore, it is in the

 best interests of the estate's creditors and the Debtors' prospects for reorganization to eliminate

 the possibility of the foregoing distractions.

              18.   Moreover, this Court has approved payment of certain other taxes, such as sales

 and use taxes on the grounds that the payment of such taxes was necessary to effectuate a

 successful reorganization in other chapter 11 cases. See, e.g., In re Citation Corp., chapter 11

 No. 04-08130-TOM (Bankr. N.D. Ala Sept. 18, 2004); In re Meadowcraft, Inc. chapter 11 No.

 02-06910 (TOM) (Bankr. N.D. Ala. Jan. 13, 2003); In re Alabaster Indus., Inc. chapter 11 No.

 98-02220 (BGC) (Bank. N.D. Ala. Oct. 29, 1998).

              19.   Finally, nothing in this Motion or the relief requested herein should be construed

 as impairing the Debtors' right to contest the amount of any Taxes that may be due to the Taxing

 Authorities.

                                   NOTICE AND PRIOR MOTIONS

              20.   Notice of this Motion has been provided to (1) the Office of the Bankruptcy

 Administrator for the United States Bankruptcy Court for the Northern District of Alabama,

 Southern Division; (2) counsel to PNC Bank, National Association, the Debtors' pre-petition

 lender; (3) counsel for the Debtors' proposed post-petition lender; (4) the holders of the Debtors'

 equity interests; (5) the Debtors' twenty (20) largest unsecured creditors; and (6) the District

 Director of the Internal Revenue Service for the Northern District of Alabama.

              21.   No previous request for the relief sought herein has been made in this bankruptcy

 case to this or any other court.



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              WHEREFORE, the Debtors request this Court enter an order, substantially similar to the

 order attached hereto as Exhibit "B," and grant the Debtors such other and further relief as this

 Court may deem just and proper.

              Dated this the 27th day of April 2012.




                                                   /s/ Marc P. Solomon
                                                   D. Christopher Carson
                                                   Marc P. Solomon
                                                   Brent W. Dorner

                                                   Attorneys for Debtors
                                                   ADAMS PRODUCE COMPANY, LLC AND ADAMS
                                                   CLINTON BUSINESS PARK, LLC

 OF COUNSEL:
 BURR & FORMAN LLP
 420 North 20th Street, Suite 3400
 Birmingham, Alabama 35203
 Telephone: (205) 251-3000
 Facsimile: (205) 458-5100




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                                         Exhibit "A"

               Taxing Authority                                Type of Tax

  Pulaski County, Arkansas                     Property
  Peggy C. Brannon Tax Collector               Property
  Alabama Department of Revenue                Business Income
  Eddie Fair, Hinds County, Mississippi Tax    Motor Vehicle / Personal Property
  Collector




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                                           Exhibit "B"

                        IN THE UNITED STATES BANKRUPTCY COURT
                        FOR THE NORTHERN DISTRICT OF ALABAMA
                                   SOUTHERN DIVISION



 IN RE:                                              )
                                                     )   Chapter 11
 ADAMS PRODUCE COMPANY, LLC, et al.,1                )
                                                     )   Case No. 12-02036-TOM-11
                          Debtors.                   )   (Joint Administration Pending)




        ORDER PURSUANT TO 11 U.S.C. §§ 105(a), 363(b) AND (c) AND 507(a)(8)
       AUTHORIZING THE DEBTORS TO PAY PRE-PETITION SALES TAXES,
     PROPERTY TAXES, PERSONAL PROPERTY TAXES AND BUSINESS LICENSE
                                  TAXES


              This matter came to be heard upon the motion (the "Motion")2 of Adams Produce

 Company, LLC ("Adams Produce") and Adams Clinton Business Park, LLC ("Adams Clinton")

 as debtors and debtors in possession (collectively, the "Debtors"), for authorization to pay pre-

 petition amounts owing in respect of pre-petition sales taxes, property taxes, personal property

 taxes, and business taxes pursuant to §§ 105(a), 363(b) and (c) and 507(a)(8) of title 11 of the

 United States Code, 11 U.S.C. §§ 101 et seq. (the "Bankruptcy Code"); upon consideration of the

 Affidavit of Thomas S. O'Donoghue, Jr. in Support of Chapter 11 Petitions and First Day

 Motions; the court having jurisdiction to consider the Motion and the relief requested therein in

              1
          The Debtors in these chapter 11 cases are Adams Produce Company, LLC and Adams
 Clinton Business Park, LLC. The location of the Debtors' corporate headquarters is 300 Union
 Hill Drive, Suite 300, Birmingham, Alabama 35209.
              2
          Capitalized terms not otherwise defined herein shall have the meanings ascribed to such
 terms in the Motion.



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 accordance with 28 U.S.C. §§ 157 and 1334; due notice of this Motion has been provided to (1)

 the Office of the Bankruptcy Administrator for the United States Bankruptcy Court for the

 Northern District of Alabama, Southern Division; (2) counsel to PNC Bank, National

 Association, the Debtors' pre-petition lender; (3) counsel for the Debtors' proposed post-petition

 lender; (4) the holders of the Debtors' equity interests; (5) the Debtors' twenty (20) largest

 unsecured creditors; and (6) the District Director of the Internal Revenue Service for the

 Northern District of Alabama; and it appearing that no other notice or further notice need be

 provided; the Court having determined that the relief sought in the Motion is in the best interests

 of the Debtors, their creditors, and all parties in interest; upon the Motion and all of the

 proceedings before this Court; and after due deliberation and sufficient cause appearing therefor,

 it is hereby

              ORDERED that the Debtors are authorized and empowered to pay the pre-petition Taxes

 pursuant obligations owing to those Taxing Authorities set forth on Exhibit "A" to the Motion,

 up to an aggregate amount of $21,000.00, as evidenced by the Payments in Transit as of the

 Petition Date, and it is further

              ORDERED the applicable banks and financial institutions to process, honor, and pay any

 and all checks, drafts and pre-petition wire transfer requests relating to the Payments in Transit,

 and to rely on the representations of the Debtors as to which checks, drafts or wire transfer

 requests are issued and authorized to be paid in accordance with this Motion without any duty of

 further inquiry and without liability to any party for following the Debtors' instructions; and it is

 further

              ORDERED that the Debtors are authorized to pay the Taxes without prejudice to the

 Debtors' right to seek additional or further relief in the future; and it is further




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              ORDERED that nothing in this Order or the Motion shall be construed as prejudicing

 any rights the Debtors may have to contest the amount or basis of any sales, use and rental tax

 obligations allegedly due any Taxing Authority; and it is further

              ORDERED that, notwithstanding anything to the contrary contained herein, the relief

 herein is granted solely to the extent that it is consistent with the order (i) authorizing the Debtors

 to (a) obtain post-petition financing on an interim basis and (b) utilize cash collateral of pre-

 petition secured parties on an interim basis, (ii) modifying the automatic stay, and (iii) granting

 related relief (the "Interim Financing Order"), and the final financing order with respect thereof,

 as applicable, and to the extent payments authorized by this Order are consistent with the

 approved Budget (as defined in the Interim Financing Order).

              Dated this the ___ day of ___________, 2012.




                                                 UNITED STATES BANKRUPTCY JUDGE




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